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Wednesday, June 27, 2012

How to Stop Revisiting the Illogic of a Gold Standard

Rather surprisingly, the following statement was recently posted online, nearly 80 years after the last significant country abandoned the gold-standard for a fiat-currency standard or, more accurately, a public-spending standard.

"The United States abandoned the gold standard, for an incomprehensible reason dreamt up by Franklin Roosevelt and a farm economist whose earlier scholarship included Alfalfa, An Apple Orchard Survey of Orleans, and Some Suggestions for City Persons Who desire to Farm."

Not at all. What this writer is missing is the difference between static & dynamic value. Public initiative is very dynamic, and essentially limitless, as shown by evolution alone (human populations and capabilities have both come a long way in the last 100,000 years, not just the last 200 years).

First, there's no way to efficiently yoke a constantly growing & limitless dynamic public capital (return on coordination) using a limited, slowly changing supply of any commodity. Alchemy failed, but public initiative hasn't yet.

Second, there's no way for rate of change of a commodity supply to match the agility of public initiative. WWII was a prime example. We mobilized incredible increases in coordination, alignment & output literally overnight, with no possible way to expand the world's gold supply at the same rate. Public initiative can & must drive currency supply at will, with any required tempo.

Here's my formal statement on the illogic of a gold-std.

“Why is state money better than gold?” Because the highest return is always the return-on-coordination. Scaling up ability to explore large-group options requires scalable large-group agility, scalable large-group intelligence and coherent alignment to emerging options. Same reasons no species or armies are resource constrained. The bigger constraint is always organizational ability.

That means that only state-money denominations are agile enough to keep up with the kinetic demands of uncontrollable public initiative. Commodity-money was thoroughly tested, and was found inadequate. It’s valuation has to be constantly re-scaled, simply because populations & their options scale faster than the magnitude of any commodity store. If that’s the case, just simplify and cut the commodity out of the re-scaling loop that links organizational ability to group outcomes.

Why don't we teach this in elementary school? It's as obvious as teamwork on sports teams, music orchestras, dance teams or music bands. (What's more valuable, hoarding equipment, or learning team play, and staging, linking & sequencing actions?)

You also need look no further than warfighting doctrine to see the difference between static & dynamic capital.

3) We decentralize decision-making by adequately distributing training, resources & practice.
(me, paraphrasing common sense)
A resilient democracy means anyone can be easily replaced by people who've already practiced the duties and activities of the person lost.

Lesson: National growth involves continuous transition from hoarding of static assets to accumulating coordination capabilities. Most just call it teamwork, and find it's value to be obvious once practiced. It's what all social species do. They trust in the return on extending distributed credit, by fiat. It's a scalable policy choice that defines human tribes, cultures, nations and markets.

We forget that coordination is also one of the forms of capital, and the most valuable one of all.

It is complete gibberish to them. They cannot comprehend what you have written here.

If you look at the periodic table itself:

http://www.webelements.com/

These metals that some people become obsessed with (or 'fond of') are all in column 11, they are actually termed so-called "noble metals". Apparently because certain humans treat them as 'nobility', rather than looking at your concept 'coordination' or working together, or an authority of civil govt as 'noble'. To them it becomes dog eat dog in some sort of deranged process to obtain control of quantities of these metals... they are really morons big time...

Starts with Cu (copper ie 'assurion') then below that is AG (silver ie 'arguion') and then Au (gold ie 'aurion') then another one Rg (Roentgenium ie '??????') which doesnt look like it has shown up yet in monetary systems...

So the "money" that had the perceived least value is Cu 29, then Ag 47, then Au 79, then perhaps Rg 111 (which apparently hasnt shown up yet for these people). Those are the numbers if anyone can see anything there...

They are all stacked on top of each other in column 11 in the periodic table and morons actually love them.... very dark.

In State and Revolution, written just before he took power, Lenin wrote:

The accounting and control necessary [for the operation of a national economy] have been simplified by capitalism to the utmost, till they have become the extraordinarily simple operations of watching, recording and issuing receipts, within the reach of anybody who can read and write and knows the first four rules of arithmetic.

If you guys want to hang your hats on an explicitly neo-Leninist theory, go for it. It makes it easier for everyone to understand your previously opaque monetary claims after one understands your aims and goals.

I believe Lenin (and Marx) both did not understand or were otherwise not able to recognize endogenous "money"... I think they looked at it as the 'gold standard' or something... so be careful with belief in all of their conclusions...

Pete, congratulations, you are getting the crucial difference between a currency issuer and a currency user. Don't stop now. There's more!

Haha, I'm already light years ahead of you. I was actually telling a joke. Actually maybe that's why you thought I said something incisive!

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Of course everyone knows the difference between a currency issuer and a currency user.

I know MMTers are espousing a pseudo-gold standard, by observing them not calling for the abolition of the state enforced dichotomy between currency issuer and currency user. Only when this dichotomy is abolished will the last vestiges of the gold standard be eradicated.

MMTers, based on their writings, seem to be fine with individual states, counties, cities, firms, and citizens to be on a pseudo-gold standard, subject to the restricting powers of the currency issuer.

Why aren't MMTers calling for the abolition of central banks? Why do you advocate for a pseudo-gold standard for those individuals who are NOT the state issuer of currency?

Lenin, like MMTers, did not understand the concept of economic calculation, did not even know the process existed, did not know that it was central to both civilization and prosperity and did not realize that his policies would impair and distort it.

As I've said, I'm cool with you guys being expressly clueless about economic calculation.

For a fiat money system to work properly you need fiscal and monetary policy to be coordinated within the shared currency zone.So letting all regional or state governments to do their own fiscal and monetary stuff whilst all still using the same currency would create problems.

Similarly, having a shared currency but disconnected fiscal and monetary policy can lead to the problems seen in the Eurozone.

There might be a (slightly unrealistic) argument for dividing the US into different currency zones though. For example, each state could have its own currency, or form a monetary/fiscal union with a couple of other neighbouring states... But this would also imply the political break up of the Union, which I don't think many people want.

So coordination and cooperation between the federal governmentand states is the more realistic, and better option for now at least.

Maybe one day the WHOLE WORLD will see the error of its ways and return to a strict gold standard system.

And also, if you bother to look at the context of the Lenin quote, it has nothing to do with a gold standard or even fiat money: it's concerns Lenin's stupid fantasy about how the development of large capitalist corporations introducing a degree of planning into capitalism and nationalization of railways and post offices (allegedly) prepare the way for the command economy communism.

In other words, totally random rubbish with no relevance to any debate on the gold standard or fiat money or MMT.

Haha, I am not a "Rothbardian". He believed wages are the primary source of income, where workers are the actual producers of products, and that profits are a deduction from wages. I cannot possibly consider myself a Rothbardian if I disagree with him on this incredibly important point.

But it's hilarious watching you troll message boards with hearsay and smears because you don't like getting refuted all the time.

For a fiat money system to work properly you need fiscal and monetary policy to be coordinated within the shared currency zone.

I don't believe a fiat money system can work as good as one where each individual is legally and without tax-based coercion free to issue and use whatever money they are able to issue and use, given the existence of other individual private property holders making their choices. In this context, there is nobody on a pseudo-gold standard.

So letting all regional or state governments to do their own fiscal and monetary stuff whilst all still using the same currency would create problems.

How about issuing their own currency?

Similarly, having a shared currency but disconnected fiscal and monetary policy can lead to the problems seen in the Eurozone.

How about de-sharing the currency, and having each country issue its own currency?

There might be a (slightly unrealistic) argument for dividing the US into different currency zones though. For example, each state could have its own currency, or form a monetary/fiscal union with a couple of other neighbouring states... But this would also imply the political break up of the Union, which I don't think many people want.

It's how the US started. 13 independent states. Even the King of England recognized the new world as a collection of independent states.

The political break up of the US does not imply economic breakup. Neighboring countries trade with each other, talk with each other, and travel to each other's respective countries.

So coordination and cooperation between the federal governmentand states is the more realistic, and better option for now at least.

I disagree. I think the better option would be to abolish the 51 pseudo-gold standards that now exist.

Maybe one day the WHOLE WORLD will see the error of its ways and return to a strict gold standard system.

That would also be an error. The best solution is to abolish all monopolies on money production, and allow individuals to produce and use money.

It's not going to happen Bob. Not because we don't understand but because we don't agree.

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In your mind economic calculation will always go wrong if government intervenes in the economy in any way and if the monetary system is not based on metal. Ok, you say people should be free to choose their own money systems but really you think a gold standard system is the best.

According to your theory, when economic calculation inevitably goes wrong as the result of any government interference, the results will always be bad, or worse than they would have been without it.

So, according to you the only way for society to achieve the best outcomes possible is for there to be absolutely no government intervention. Any government intervention necessarily distorts things for the worse. Especially fiat money.

That's basically what you want us to accept. It's utter nonsense of course but you won't be satisfied until everyone agrees with you that it's absolutely 100% true.

It has nothing to do with economic calculation really. It's just about your particular ideology, and your ignorance of real world economics (not the fantasy world economics that you susbscribe to).

But until we say, "Yes Bob, your ideology is 100% correct, everything you believe is 100% correct" you'll continue to say that we don't understand anything and that we're closet "Leninists".

What you don't appear to understand, Bob, is just how warped and comical you appear to us.

"It’s valuation has to be constantly re-scaled, simply because populations & their options scale faster than the magnitude of any commodity store."

There is no need for "re-scaled valuation" in a gold standard. In a gold standard, gold serves as the standard of value. The only "re-scaling" that took place was on the side of US dollars, which were printed faster than what the par value justified in terms of gold production, which lead to constant bouts of gold outflow at the artificially low price.

In an actual gold standard (which I am against BTW) the "dollar" would be DEFINED as so much gold. No printing beyond this would take place. No "re-valuation" would be necessary.

What proved "inadequate" was the state being able to constrain itself once it took physical possession of society's gold, and "promised" to always redeem the dollars into par value gold. In 1933, they broke their promise to the people. In 1971, they broke their promise to the world.

Is that the gold standard's fault, or the fault of people failing to curb the coercion from the state, because they wanted more of it?

As we have explained ad nauseam to the quite obtuse “Lord Keynes”, the problems of economic calculation and miscalculation afflict both a Soviet as well as a Keynesian program. Lenin could not see how his program would impair economic calculation and neither can the Keynesians nor MMTers.

No, because I think it is justified for me, but nobody else, to take possession of the production of others against their will, and to threaten them with force to act in different ways that benefit me personally. I find this to be the most pragmatic for my interests.

If I were against the above, then you might be right to call me a libertarian.

You and Lenin share the misguided belief that state bureaucrats backed by SWAT teams have the knowledge (and benevolence) to administer the "economy". One is either free to administer one's own private property or else he is subject to government overseers. You and Lenin both think you have the knowledge, insight, right and ability to run other's lives. I don't believe I do and I don't believe you do.

Pete: "I don't believe a fiat money system can work as good as one where each individual is legally and without tax-based coercion free to issue and use whatever money they are able to issue and use,"

To paraphrase Hyman Minsky: Money is an IOU. Everyone can legally issue their own IOU's. The trick is getting others to accept them.

The "trick" that govts use as currency issuers is simple: A currency issuer that only accepts its own IOU's in settlements of obligations to it forces those with such obligations to obtain its IOU's for settlement.

You can see where this is leading, and I know you don't want to go there.

I understand perfectly what they are saying, Matt. Remember we went through this with Bob Murphy.

No, you don't understand what they are saying. It's clear in your fallacious claims you keep making. Either than or you're purposefully being deceitful, but I'd rather give you the benefit of the doubt.

What they are saying is "coconuts."

No, what they are saying is economic calculation is distorted with central banks having to access to the price system of profit and loss when it comes to the production of money itself. That misleads market participants, who by the way have to accept such toilet paper because they are forced to pay taxes in it.

Bob Roddis: "As we have explained ad nauseam to the quite obtuse “Lord Keynes”, the problems of economic calculation and miscalculation afflict both a Soviet as well as a Keynesian program. Lenin could not see how his program would impair economic calculation and neither can the Keynesians nor MMTers."

Yes the world was doing so well climbing out of the crater of the Great Depression while it was on the gold standard. The countries that abandoned the gold standard the earliest did best.

Pete: "I don't believe a fiat money system can work as good as one where each individual is legally and without tax-based coercion free to issue and use whatever money they are able to issue and use,"

To paraphrase Hyman Minsky: Money is an IOU. Everyone can legally issue their own IOU's. The trick is getting others to accept them.

The "trick" you're talking about is actually who has the biggest guns. The state uses its guns to demand taxes be paid in their currency, even if I deal exclusively in another commodity. Because of that, tax paying employers are coerced into paying US dollar wages, and tax paying workers are coerced into accepting them.

The "trick" that govts use as currency issuers is simple: A currency issuer that only accepts its own IOU's in settlements of obligations to it forces those with such obligations to obtain its IOU's for settlement.

This is an age old "trick." Threaten people with rape in a cage, and sure, they'll accept whatever it is you demand they pay you with.

You can see where this is leading, and I know you don't want to go there.

"I don't believe a fiat money system can work as good as one where each individual is legally and without tax-based coercion free to issue and use whatever money they are able to issue and use, given the existence of other individual private property holders making their choices."

I understand that this is your belief.

Do you actually understand that it is a belief?

Or do you think it's a fact?

"I think the better option would be to abolish the 51 pseudo-gold standards that now exist."

Ok, so campign for the break up of the United States of America. Personally I probably agree that smaller countries cooperating with each other would be better. I'm generally anti the direction of travel within the eurozone. Ending the euro and going back to national currencies I think could be better. However, there are (possibly) also global economic considerations to take into account, from a purely pragmatic perspective.

I think the US is probably too large. But as I say a break up of the union strikes me as unrealistic, and doesn't appear to be wanted by many. I may be wrong.

Though I wouldn't advocate a return to a gold standard, states issuing their own currencies and controlling their own fiscal and monetary policy could possibly be a good idea.

"The best solution is to abolish all monopolies on money production, and allow individuals to produce and use money."

Individuals can and do produce and use their own currencies today. However, individuals tend form themeselves into groups, and after a while one currency tends to dominate. Do you want that currency to be exclusively controlled by the richest people and organisations (generally banks) in their own interest, or would you rather final control was invested in public organisation? MMTers generally prefer the latter, and take a more optimistic view of what society and democracy can potentially achieve. We want to rein in the banks.

I understand you probably don't share this view.

From my perspective, whilst you talk about individual choice and freedom, your rhetoric basically conceals the fact that you want an end to democracy and all the political rights and freedoms that come along with it. Or at least you want a political system which is based on your ideals and your beliefs alone. In your ideal world, no one is allowed to challenge or repeal your ideals. You see you ideals as absolute, unquestionable. That is the kind of thinking which leads quickly to tyranny.

I think your concept of a utopia based on individual voluntarism could in effect turn quite quickly into a world utterly dominated by a 'plutocratic' elite, with no way for anyone to change their circumstances other than through some submissive economic process.

Essentially I think it could end up as a 'dictatorship of capital'. So I don't buy your argument that you represent freedom and MMTers represent oppression.

I'd say that people demand different rights and that these have to be balanced against each other within a civilized society.

Choosing private property as an absolute, utterly inviolable right above all other rights strikes me as being quite arbitrary. It is also based on a paradox: private property is a social construct, established and preserved by social constructs. Yet you want all other social constructs to submit to this one.

Personally I see taxation not as theft but as a compulsory fee that eligible members of this society have to pay in return for enjoying the benefits of being members of this society. It's not perfect, as society never is.

I think that banning taxation by government and making all payment voluntary may actually be unethical, as it would essentially make everyone (including future generations) subject to the passing whims and fancies of an individual. If someone decided that they didn't want to invest in a new water system for the community, for example, then it wouldn't happen. Future generations wouldn't get to benefit from that investment. All because of one guy.

The fact is, we have to work together sometimes, and this requires certain rules which everyone has to accept. Ideally, in a democratic system we have the right to try and change those rules. Which brings us back to the size of the USA. The major problem with having such a large country is that the democratic system can become alien and dysfuntional..

How can static-value economic calculation be of much use in a dynamic-value world?

Unless you can read minds Mr. Erickson, there is no other source of objective knowledge of the subjective values of individuals than free market prices. A relatively fixed amount of commodity money allows everyone to operate with a common medium of exchange and the prices established using such a medium will reflect the changes in dynamic activities that will allow intelligent planning based upon real-world wants, desires and physical reality as understood by the billions of humans on this planet. Your fiat funny-money regime impairs those determinations and is the cause of the boom/bust cycle and the depressions that afflict us today. And your beloved SWAT team overseers cannot possibly have the knowledge necessary to run things as you think you can. You think like Lenin.

I'm guessing you may say something like, if there's a decent return to be made then someone will always invest. Of course, such an argument would be based on the idea that the market can always deliver all of the economic/social outcomes worth having. That would be a dogmatic assertion based on a blind faith and not backed up by evidence.

Do you see how close such an assertion would be to fundamentalist dogma? A self-evident, pure and unquestionable truth?

"I don't believe a fiat money system can work as good as one where each individual is legally and without tax-based coercion free to issue and use whatever money they are able to issue and use, given the existence of other individual private property holders making their choices."

I understand that this is your belief.

Do you actually understand that it is a belief?

I meant it requires belief to accept the notion that fiat money system can work as well as one where each individual is legally and without tax-based coercion free to issue and use whatever money they are able to issue and use, given the existence of other individual private property holders making their choices.

I don't believe it, so I don't accept it.

Or do you think it's a fact?

I know it's a fact that pseudo-gold standard fiat money is worse.

"I think the better option would be to abolish the 51 pseudo-gold standards that now exist."

Ok, so campign for the break up of the United States of America.

It's not a break up of the United States. It's only a break up of the pseudo-gold standard national central bank.

The United States of America can remain the Unites States of America. Economically, we'd still have the capital accumulation, and from then on growth would increase because of the abandonment of the 51 pseudo-gold standards.

Personally I probably agree that smaller countries cooperating with each other would be better.

I think it would be even better if countries got so small, they'd disappear.

I'm generally anti the direction of travel within the eurozone. Ending the euro and going back to national currencies I think could be better. However, there are (possibly) also global economic considerations to take into account, from a purely pragmatic perspective.

I think the US is probably too large. But as I say a break up of the union strikes me as unrealistic, and doesn't appear to be wanted by many. I may be wrong.

The (I argue) invariable result of central banking will make it almost a guarantee. I'd rather do it peacefully while things are still somewhat stable, then waiting until it becomes unstable and risking the rise of dictators who promise to stop the chaos. It's happened before.

Though I wouldn't advocate a return to a gold standard, states issuing their own currencies and controlling their own fiscal and monetary policy could possibly be a good idea.

That would be a pseudo-gold standard for the counties and cities within each state. I personally won't advocate for that either.

Anonymous, we are talking within conceptual models and all conceptual models have assumptions that function as stipulated boundaries. We are generally arguing at bottom about those stipulations. When we get there, everyone is a fundamentalist, because we are dealing with foundations.

This is a reason that the debate is rather stymied with Bob Roddis and Pete, and vimothy in another context. We differ over fundamental stipulations, and at that point all the parties can do is either agree to disagree or recriminate. I would prefer to agree to disagree rather than get all in a huff over a tempest in a teapot.

"The best solution is to abolish all monopolies on money production, and allow individuals to produce and use money."

Individuals can and do produce and use their own currencies today.

But they are ALSO forced by the state's laws to pay taxes in US dollars. That pretty much stops any chance for free individual based money issuance and usage.

However, individuals tend form themeselves into groups, and after a while one currency tends to dominate. Do you want that currency to be exclusively controlled by the richest people and organisations (generally banks) in their own interest, or would you rather final control was invested in public organisation?

The former, because it's based on voluntary trade and consent, rather than violence and coercion as is the case in the latter option.

"Public organization" is a euphemism for violence against peaceful minorities who dissent against the majority.

MMTers generally prefer the latter, and take a more optimistic view of what society and democracy can potentially achieve. We want to rein in the banks.

But you won't rein in the central bank, even though the central bank is what enables the private banks to expand credit and exacerbate the business cycle.

I understand you probably don't share this view.

I don't mind disagreeing with people. It's when a disagreement requires that my person or property be initiated with force or threats of force, if I don't "agree."

From my perspective, whilst you talk about individual choice and freedom, your rhetoric basically conceals the fact that you want an end to democracy and all the political rights and freedoms that come along with it. Or at least you want a political system which is based on your ideals and your beliefs alone. In your ideal world, no one is allowed to challenge or repeal your ideals. You see you ideals as absolute, unquestionable. That is the kind of thinking which leads quickly to tyranny.

Democracy only promises freedom of the majority. It does not promise the freedom of the individual, because individuals might be in the minority.

You say my ideals are absolute, but they are no less absolute that yours. Your absolutism is concealed behind a veil of "democratic freedom" which is not freedom for me, it is not freedom for those in the minority, and it might not even be freedom for those in the majority if they might become a part of the minority in the future. Nobody is really free in democracy. The individual is only as free as "the mob" abstains from using violence, either directly or indirectly through a representative institution that you call a democratic state.

You're taking my personal power as far too exaggerated. It is precisely your absolutism that leads to tyranny. Democracy led to tyranny in Athenian Greece.

"there is no other source of objective knowledge of the subjective values of individuals than free market prices"

How utterly ridiculous.

Why don't you tell us some of your subjective values, Bob?

Do you prefer sitting in front of a warm fire with a cup of cocoa, or do you prefer freezing to death in a gutter?

Are you fond of eating good food in the company of good friends, or are you more partial to starving to death in a gutter on your own?

Please let us know.

However, the problem is, if you do try to tell us we won't possibly be able to understand anything you say as there won't be a free market price mechanism at work telling us what your subjective preferences are.

Without a price tag your words will just appear like meaningless, incomprehensible gobbledegook.

We need a price Bob before we can understand what you think. Give us a price.

"Democracy only promises freedom of the majority. It does not promise the freedom of the individual, because individuals might be in the minority."

No, in democracies today people have rights and responsibilities, freedoms and laws they have to abide by.

They have the freedom to challenge the laws, and to try to change them, but not to break them.

Democracy does not only work through the ballot box but also through the numerous institutions which have grown up to constantly question and scrutinise the whole.

There are institutional checks and balances, and a constant balancing act to be performed (in a variety of ways and through numerous channels) between the the various constitutent parts of society.

The democratic process of expressing preferences through different forms of voting is balanced by other processes within the legal system, civil society, the economy, politics, academia, science, etc. All feed into each other.

One of the most important things democracy maintains is the freedom to question, challenge and attempt to reform society through peaceful means. Society is not perfect.

In your ideal world, would there be any laws? Would you allow people to challenge and change these laws? On what foundation would your laws be built? Would people be asked for their input? Or would you assume that your laws are right and unquestionable and absolute?

Only if those prices are communicated in terms of quantities of elements from column 11 of the Periodic Table looks like...

since we would need continuously increasing amounts of these elements to be able to transact with each other, this would create a process whereby these elements would always be sought and extracted from the subterranean regions of the earth thru what would become zombie-like human labor/activity... freaky!

True. And "the state theory of money" fails because it is acatallactic.

FTA:

"It is not possible to master the problems of theoretical economics unless questions of the determination of prices (commodity prices, wages, rent, interest, etc.) are at first dealt with under the supposition of direct exchange, indirect exchange being temporarily left out of account. This necessity gives rise to a division of the theory of catallactics into two parts—the doctrine of direct, and that of indirect, exchange."

"Democracy only promises freedom of the majority. It does not promise the freedom of the individual, because individuals might be in the minority."

No, in democracies today people have rights and responsibilities, freedoms and laws they have to abide by.

Rights and freedoms decided by...the majority.

They have the freedom to challenge the laws, and to try to change them, but not to break them.

Challenge of the laws which will be decides by...the majority who elect the politicians who select the judges.

Democracy does not only work through the ballot box but also through the numerous institutions which have grown up to constantly question and scrutinise the whole.

Those are deviations away from democracy. They are not inherent in democracy itself.

There are institutional checks and balances, and a constant balancing act to be performed (in a variety of ways and through numerous channels) between the the various constitutent parts of society.

Institutions composed of people who are selected according to....democratic vote.

The democratic process of expressing preferences through different forms of voting is balanced by other processes within the legal system, civil society, the economy, politics, academia, science, etc. All feed into each other.

You mean the majority at least has some barriers from practicing the full effects of democratic rule, which is enough pro-individualist philosophy among the populace. Democracy however cannot promise the majority will self-constrain.

One of the most important things democracy maintains is the freedom to question, challenge and attempt to reform society through peaceful means. Society is not perfect.

Freedom to question? Oooooo, is that like a gulag prisoner being free to weep?

Challenge? Who decides the outcome? The majority.

Reform? Who decides what is and is not done via reform? The majority.

In your ideal world, would there be any laws?

In your ideal world, would there be equality under the law, which means if someone can tax, everyone can tax? If someone can claim sovereign adjudication authority over disputes, everyone can do so? If someone can control the printing press and create toilet paper and use force to demand others pay them taxes in that toilet paper, everyone can do so? If an elected body of individuals can enforce their laws, everyone can enforce their laws?

Would you allow people to challenge and change these laws?

Would you allow anyone other than the majority to change the majority's laws?

On what foundation would your laws be built?

Can laws be built on something other than the majority imposing its will on the minority?

Would people be asked for their input?

Is the minority's "input" anything other than a prisoner pleading to be set free?

Or would you assume that your laws are right and unquestionable and absolute?

Would you assume the majority's laws are right and unquestionable and absolute, and that if there are any problems, it can only be decided by the majority?

Citation on this? I find it hard to believe Graeber is now a Mengerian.

Oh I didn't mean to imply that Graeber is a Mengerian.

I only meant that his book's thesis is completely consistent with the barter origin of money, and that he didn't make any case against it.

For his discussion on money "as a unit of account", from silver to barley, these commodities were valued in their own right prior to them being valued as "money as a unit of account" by the Kings who instituted it. They were not non-existent and not valued prior, and then all of a sudden by decree they became money as a unit of account.

Menger's theory is a logically necessary theory. History can never refute it.

As demonstrated in “Politics in Plural Societies: A Theory of Democratic Instability” by Alvin Rabushka and Kenneth Shepsle back in 1972, multi-ethnic democracies with a high degree of public goods generally and invariably tend towards the Rwanda model of inter-ethnic slaughter. Someone forgot to tell Dubya and the neon-cons this when they decided they wanted to turn multi-ethnic Iraq into a democracy.

"Another acatallactic doctrine seeks to explain the value of money by the command of the state. According to this theory the value of money rests on the authority of the highest civil power, not on the estimation of commerce. The law commands, the subject obeys. This doctrine can in no way be fitted into a theory of exchange; for apparently it would have a meaning only if the state fixed the actual level of the money prices of all economic goods and services as by means of general price regulation. Since this cannot be asserted to be the case, the state theory of money is obliged to limit itself to the thesis that the state command establishes only the Geltung or validity of the money in nominal units, but not the validity of these nominal units in commerce. But this limitation amounts to abandonment of the attempt to explain the problem of money. By stressing the contrast between valor impositus and bonitas intrinseca, the canonists did indeed make it possible for scholastic sophistry to reconcile the Roman-canonist legal system with the facts of economic life. But at the same time they revealed the intrinsic futility of the doctrine of valor impositus; they demonstrated the impossibility of explaining the processes of the market with its assistance."

There is no nuance in your thought. No possibility that you may be incorrect or that your 'flawless' logic might be open to question in any way whatsoever. No willingness to accept that anything which deviates in the slightest from your simplistic fundamentalist opinions might have any value in any way.

Your freedom-loving rhetoic hides a deep seated desire for the entire world to conform to your beliefs and your beliefs alone.

Pete@June 27, 2012 3:30 PM:"No, it is factually correct. Even Graeber was reluctantly compelled to admit that a commodity money arises out of it first being a barter good."

Let me just say that this guy's lies beggar belief. Graeber is quite clear that money can emerge in multiple ways, even by planning and design in, for example, temple authorities in ancient Egypt and Mesopotamia.

Let me just say that this guy's lies beggar belief. Graeber is quite clear that money can emerge in multiple ways, even by planning and design in, for example, temple authorities in ancient Egypt and Mesopotamia.

It should not be surprising that perpetual troll LK accuses his opponents of lying.

Graeber is clear that money can arise in multiple ways yes, but those multiple ways have to do with whether or not debt/credit preceded money as a unit of account / medium of exchange. NONE are proofs, empirically or otherwise, that money arose outside of barter (where barter INCLUDES spot barter AND intertemporal barter).

LK's links will just take one to what I already said, except they'll also contain a lot of ignorance concerning Menger's theory, and the historical record. Laugh at the refutations to his claims.

"According to this theory the value of money rests on the authority of the highest civil power, not on the estimation of commerce"

Within MMT the actual value of fiat currency derives from a combination of the two. There is a basic need for the currency created by the 'debt' imposed by taxation. Beyond that the value is determined by the quantity issued relative to this 'debt' and by market supply and demand dynamics.

"For [sc. Graeber's]... discussion on money "as a unit of account", from silver to barley, these commodities were valued in their own right prior to them being valued as "money as a unit of account" by the Kings who instituted it.

Just because they were valued by kings or temple priests, it does not mean the silver standard arose by the Mengerian barter spot trade theory.

They were not non-existent and not valued prior, ...

Red herring.

...and then all of a sudden by decree they became money as a unit of account.

The evidence suggests that they were indeed imposed by temple institutions in a type of economic planning:

If the great mass of people VOLUNTARILY decide to do some project together collectively, that's fine. That's called "the private sector". However, the purpose of governmental "democracy" is to have 50.1% of the voters vote to legitimize a group of overseers to FORCE everyone to do things that they would not do without the gun stuck in their face. This is a truism. Government is force and government democracy decides which gang gets to use it and against whom.

If the benefits of voluntary collective action are so great, convince people to do so voluntarily. But please stop conflating such action with majority rule government. It's just not the same thing. And you guys are too naive to see it.

"According to this theory the value of money rests on the authority of the highest civil power, not on the estimation of commerce"

Within MMT the actual value of fiat currency derives from a combination of the two.

You cannot "combine" logically incommensurable concepts.

There is a basic need for the currency created by the 'debt' imposed by taxation.

That is not a "need" within the sphere of market EXCHANGES. It arises solely due to the FORCE, i.e. a violation of market exchanges, inherent in the state saying "Pay me in what I print, or I'll throw you in a cage."

This is not market exchanges. This is command and obeying. The money itself has no way to enter exchanges in this way. The state depends on market exchanges, not the other way around.

Beyond that the value is determined by the quantity issued relative to this 'debt' and by market supply and demand dynamics.

but those multiple ways have to do with whether or not debt/credit preceded money as a unit of account / medium of exchange. NONE are proofs, empirically or otherwise, that money arose outside of barter (where barter INCLUDES spot barter AND intertemporal barter)."

They were imposed AFTER being produced and valued for their own sake, i.e. barter.

A commodity like silver or barley cannot become a unit of account unless someone found it valuable enough to produce for its own sake, i.e. barter. This barter can take the form of spot trading, or intertemporal credit trading.

Menger's theory is a logically necessary theory. History can never refute it.

Tell us another joke.

It's not a joke. What is a joke is watching you make a fool of yourself for the millionth time.

Anyone who tells you that their economic theory is "logically necessary theory. History can never refute" has moved into the la-la land world of idiocy, like the Freudians.

Yeah, I guess mathematicians and logicians are in la la land according to resident cultist LK.

Economics is not an empiricist science. Empiricism is self-contradictory, as Mises proved, as you have not educated yourself in.

Notice how you added the word "pure" because you know you're full of it.

You added "pure" so as to pretend that the barter theory of money has to be, and can only be, a SPOT exchange theory of barter. But that is NOT necessary in Menger's theory.

The fact that Menger and Mises used spot barter as explanation, does not mean that introducing credit barter somehow falsifies the logically necessary fact that barter per se (spot and credit) precedes that commodity becoming a money.

You've been refuted on this point countless times, and yet you spew this nonsense as if it never happened.

"but those multiple ways have to do with whether or not debt/credit preceded money as a unit of account / medium of exchange. NONE are proofs, empirically or otherwise, that money arose outside of barter (where barter INCLUDES spot barter AND intertemporal barter)."

Again, just gross distortion of what Graeber says.

No, it isn't a "gross distortion." Anyone who reads his book can grasp this.

I see Bob Reddis really upset about MMT because It debunks all the Austrian nonsense. (interest rates are going to skyrocket once markets find out, there is going to be inflation, we are leaving burden to our children etc, It's all been debunked). After debunking all this, what's left for him? 'taxes should not be coercive''there is no public purpose''democracy is no freedom'

Who is going to buy this? Bob Murphy and may be few more lunatics. This is exactly why he is so angry with MMT. MMT didn't make taxes coersive, MMT didn't establish democracy. MMT just shows how to make the best of It using existing system.

"They were imposed AFTER being produced and valued for their own sake, i.e. barter."

LOL!

In which case, the Rothbardian theory of money's origins lies in ruins, for Rothbard denied that money could ever be imposed by government:

“[sc. Mises’s] Regression Theorem also shows that money, in any society, can only become established by a market process emerging from barter. Money cannot be established by a social contract, by government imposition, or by artificial schemes proposed by economists.” (Rothbard 2009: 61).

I see Bob Reddis really upset about MMT because It debunks all the Austrian nonsense.

That's hilarious, because all I have seen is refutation after refutation of MMT by Austrian theory.

(interest rates are going to skyrocket once markets find out, there is going to be inflation, we are leaving burden to our children etc, It's all been debunked).

Not all Austrians predicted this. Empirical predictions are not in the domain of Austrian economics proper. Austrian economics is about the logical constraints within which all empirical phenomena take place.

In which case, the Rothbardian theory of money's origins lies in ruins, for Rothbard denied that money could ever be imposed by government:

“[sc. Mises’s] Regression Theorem also shows that money, in any society, can only become established by a market process emerging from barter. Money cannot be established by a social contract, by government imposition, or by artificial schemes proposed by economists.” (Rothbard 2009: 61).

That is correct. Money ARISES out of barter. Even the Kings who imposed silver and barley units of account, depended on silver and barley being valued PRIOR for their own sake.

If a King tried to impose a non-market valued commodity as money, like for example your blog posts, it would not be accepted by anyone, which means he could not collect taxes in them.

A king would have to choose a commodity that is already valued for a non-money use prior, either by himself, or by others.

Are you going to tell us that Rothbard has now been refuted?

No, I will say you haven't the foggiest clue what Rothbard meant, because you STILL are completely ignorant of catallactics.

Watching you collect these tidbits only provides me with endless laughter.

"Silver must be valued for non-monetary purposes prior to Croesus imposing taxes in silver."

According to what Austrian? Give us a reference.

That's not what Menger says, and you know it.

Menger concludes that precious metals have arisen as a medium of exchange among many peoples because “their saleableness is far and away superior to that of all other commodities” (Menger 1892: 252).

And even Menger differs from Mises and Rothbard on how thing can become money:

“It is not impossible for media of exchange, serving as they do the commonweal in the most emphatic sense of the word, to be instituted also by way of legislation, like other social institutions. But this is neither the only, nor the primary mode in which money has taken its origin." (Menger 1892: 250).

That is correct. Money ARISES out of barter. Even the Kings who imposed silver and barley units of account, depended on silver and barley being valued PRIOR for their own sake.

That is not the Austrian theory of how money emerges - just a patheticcaricature of it, to get you out of what you've already admitted: that money was imposed on societies, certainly in Mesopotamia and Egypt.

"Silver must be valued for non-monetary purposes prior to Croesus imposing taxes in silver."

According to what Austrian? Give us a reference.

Hahaha, "I cannot refute you, so I need to commit the fallacy of authority and reject what you say."

Wow.

That's not what Menger says, and you know it.

I didn't say that is what Menger said, and YOU know it.

Menger concludes that precious metals have arisen as a medium of exchange among many peoples because “their saleableness is far and away superior to that of all other commodities”

AS A MEDIUM OF EXCHANGE, yes. But money qua money, is not ONLY about it being a medium of exchange.

And even Menger differs from Mises and Rothbard on how thing can become money:

“It is not impossible for media of exchange, serving as they do the commonweal in the most emphatic sense of the word, to be instituted also by way of legislation, like other social institutions. But this is neither the only, nor the primary mode in which money has taken its origin."

Medium of exchange.

That is one, and most Austrians agree the most important, attribute of money.

"It is not impossible for media of exchange, serving as they do the commonweal in the most emphatic sense of the word, to be instituted also by way of legislation, like other social institutions. But this is neither the only, nor the primary mode in which money has taken its origin."

Medium of exchange.

That is one, and most Austrians agree the most important, attribute of money."

So, what, now you say (like Menger) that "It is not impossible for media of exchange, serving as they do the commonweal in the most emphatic sense of the word, to be instituted also by way of legislation, like other social institutions", is that correct?

Relax and go ask Bob Murphy if he wants to sell any of his coconuts. Then you'll have a way to gain some objective knowledge of each other's subjective values. I think he must have quite a few coconuts stored up by now.

Where? Bob Murphy saving coconuts? Or Bob Murphy talking about money multiplier and how reserves are going to create inflation in the future?

Bob Murphy making an empirical prediction is not the same thing as Austrian economics.

Mises argued we cannot make predictions on price inflation based on money supply, and one major reason is that there is also a demand for money. In our society, there are many complicating factors, like IOR, credit deflation, and so on.

Modern monetary THEORY hasn't "debunked" Austrian THEORY.

Not all Austrians predicted hyperinflation. But for some reason, MMTers like to cherry pick Murphy and Schiff and say "The Austrian school has been debunked." No, it hasn't. Two people made incorrect predictions. EVERY school has economists that have made incorrect predictions. If there is a school that hasn't, then the economists from that school would all be multi-billionaires.

"That is one, and most Austrians agree the most important, attribute of money."

So, what, now you say (like Menger) that "It is not impossible for media of exchange, serving as they do the commonweal in the most emphatic sense of the word, to be instituted also by way of legislation, like other social institutions", is that correct?

Of course that is correct. A state can use force to turn a market based money into a state monopolized one. The whole friggin ABCT is built on that assumption ya noob.

Relax and go ask Bob Murphy if he wants to sell any of his coconuts. Then you'll have a way to gain some objective knowledge of each other's subjective values. I think he must have quite a few coconuts stored up by now.

Take a chill and ask Mosler if he wants to sell any of his toilet paper. Then you'll be able to magically create real goods and services.

And as for silver, the cruder and more extreme Austrian theory requires that it emerged by barter:

“[sc. Mises’s] Regression Theorem also shows that money, in any society, can only become established by a market process emerging from barter. Money cannot be established by a social contract, by government imposition, or by artificial schemes proposed by economists.” (Rothbard 2009: 61).

Yet as late as the Old Babylonian period (c. 2000–1600 BC), silver was largely confined to temples and palaces (Nemet-Nejat, K. R. 2002. Daily Life in Ancient Mesopotamia, Hendrickson, Peabody, Mass. p. 267). It did not circulate much as an actual medium of exchange within Mesopotamia in the third millennium BC. Silver did not emerge as the "most saleable commodity" in barter spot trades and then indirect trades within Mesopotamia to attain the status of money. Rather, a silver unit of account was developed by temples from its use as a weight unit in those temples.

Pete wrote: That's hilarious, because all I have seen is refutation after refutation of MMT by Austrian theory.

Where? Bob Murphy saving coconuts? Or Bob Murphy talking about money multiplier and how reserves are going to create inflation in the future?

And I asked you where. We've been hearing nothing but nonsense from Austrians and they have clearly demonstrated no knowledge about monetary economics. Bob Murphy is not the only Austrian who has been talking about the money multiplier.

Like I said before, if you leave the unsustainablity of government finances and inflation out of your ideas and say that there has never been this free market utopia that we are talking about, then there is not many supporters of your ideas. And don't forget to mention that money has been established by governments throughout the history and It has always been credit.

And as for silver, the cruder and more extreme Austrian theory requires that it emerged by barter

What happened, LK? Your idiotic claims didn't hold any water, so now you're derailing the tutoring session once again into red herrings?

Regression Theorem also shows that money, in any society, can only become established by a market process emerging from barter. Money cannot be established by a social contract, by government imposition, or by artificial schemes proposed by economists.

That is correct.

Yet as late as the Old Babylonian period (c. 2000–1600 BC), silver was largely confined to temples and palaces (Nemet-Nejat, K. R. 2002.

That is not something that justifies a "yet". To say that silver "was largely confined to temples" of course means it WASN'T ONLY confined to temples.

The rulers of the temples CHOSE silver because it was already being valued prior, before its use IN the temples.

And I asked you where. We've been hearing nothing but nonsense from Austrians and they have clearly demonstrated no knowledge about monetary economics.

They've clearly demonstrated superior knowledge, which is why they can easily debunk MMT advocacies apart from the accounting tautologies.

Bob Murphy is not the only Austrian who has been talking about the money multiplier.

Talking about the money multiplier doesn't mean one is predicting high price inflation.

Like I said before, if you leave the unsustainablity of government finances and inflation out of your ideas and say that there has never been this free market utopia that we are talking about, then there is not many supporters of your ideas.

Why is there a false dichotomy between market process and social construct?

It's not a false dichotomy, when you realize what is meant by "social construct". It means coercion against individual private property, either from totalitarian dictatorial decree, from a monarchical decree, or from a majority elected governmental decree.

"No it doesn't, you ignorant moron. Value is REALIZED in exchanges, either autistic exchanges, or inter-personal exchanges."

This now takes the cake.

If an "autistic exchange" is defined as:

"the action ... performed by an individual without any reference to cooperation with other individuals, we may call it autistic exchange

then if any commodity or thing is merely valued subjectively by some individuals, without any role in barter or role as a saleable commodity in barter exchange, nevertheless it could be imposed by the state as money?? Is that right?

If so, the whole Austrian theory of money is reduced to a claim so obviously weak that it presents to threat at all to any chartalist or anthropological theory of money emerging by state imposition or by social convention.

Congratulations, Pete, way to refute the Austrian theory of money's origins!

We can all move on now: Pete's done our work for us. Three cheers for him.

It's not utopia, It is reality for over 40 years now. You might not like facts but this is a fact.

there has never been this free market that Rothbardians are talking about. This is also a fact.

"Regression Theorem also shows that money, in any society, can only become established by a market process emerging from barter. Money cannot be established by a social contract, by government imposition, or by artificial schemes proposed by economists."

it's nonsense and that's why I am saying that Austrians are clueless about money.

then if any commodity or thing is merely valued subjectively by some individuals, without any role in barter or role as a saleable commodity in barter exchange, nevertheless it could be imposed by the state as money?? Is that right?

LOL! No.

I just said value is realized by austistic or interpersonal exchanges.

In order for a money as medium of exchange to be state imposed, that requires the commodity to be valued prior in interpersonal exchanges. Sure, a King can use a commodity for his own unit of account by valuing the commodity prior in non-monetary uses, but that is different from the medium of exchange attribute.

The autistic exchange and inter-personal exchange was the foundation for where value comes from. It wasn't to argue that autistic exchange manifested value can lead to state imposing a commodity becoming a medium of exchange.

In order for a money as medium of exchange to be state imposed, that requires the commodity to be valued prior in interpersonal exchanges.

Again: the Austrian theory of money's origin requires MORE than some thing merely being valued in interpersonal exchanges:

"Over time, Menger argued, the most salable goods were desired by more and more traders because of this advantage. But as more people accepted these goods in exchange, the more salable they became. Eventually, certain goods outstripped all others in this respect, and became universally accepted in exchange by the sellers of all other goods. At this point, money had emerged on the market."http://mises.org/daily/5598/Have-Anthropologists-Overturned-Menger

You're now so dishonest you can't even correctly describe the Austrian theory you attempt to defend.

"In order for a money as medium of exchange to be state imposed, that requires the commodity to be valued prior in interpersonal exchanges."

Again: the Austrian theory of money's origin requires MORE than some thing merely being valued in interpersonal exchanges:

"Over time, Menger argued, the most salable goods were desired by more and more traders because of this advantage. But as more people accepted these goods in exchange, the more salable they became. Eventually, certain goods outstripped all others in this respect, and became universally accepted in exchange by the sellers of all other goods. At this point, money had emerged on the market."

Quote "A man alone on a desert island can still be private property owner of that island even if nobody else is around."

Maybe in his own mind but that's it but that simply a appeal to his own authority.

On what basis does Pete know this individual claim is true?

He certainly can't deduce logically this from any set of claims.

He is either saying that he knows apriori that every one else in this situation will agree with the Man on the island on the issue which to say everyone is of the same mind which therefore say that individualism is false or Pete must saying that property exists without interaction,

But property can't exist without the ability to interact with it which is a contradiction as to exist means to interact.

If property exists then it must be different in than non-property in it interactive effects and without the presence of someone else on the island what observation can Pete make that would be different than the Island that the lone occupant who believes that island is his property and an island on which the lone occupant doesn't?

Pete must then claim that he know that the claim is valid because it based on his deduction based on the nature of individual subjective evaluation which doesn't require objective observations.

However, Pete has just refuted himself and Bob Robbis because in claiming to know apriori what every man alone has in mind when they claim the island as personal property as opposed to every other man without a externally objective observation with by definition requires interaction.

Pete and Bob must make the claim that they know the individual subjective evaluation of every individual mind which according to them isn't possible and which is the basis of their claim that anything other than anarchy economic calculation is impossible.

So in making the claim that economic calculation is impossible because of individual subjective evaluation is self-contradictory because they can't that claim without claiming to know subjectively by deduction that no ones objective calculation doesn't match with anyone else's subjective evaluation which essentially claiming that they can make that economic calculation because they just did in making the apriori claim they know everyone's objective evaluation can't match subjective evaluation itself a calculated claim.

The fundamental problem is the Austrian abuse of logical deduction is nothing more than a appeal to authority because a deductive statement by definition contains it's own conclusion and there is adds no new information and thus can prove nothing about anything that isn't already stated.

Austrian praxeology is by definition a logical fallacy of appeal to the authority that the Austrian claims because the Austrian claims them to be so. But deduction doesn't let you address the truthfulness of such claim based on themselves and to do wouldn't be deduction..see Kurt Friedrich Gödel and Riemann.

The idea of building a system of knowledge based on deduction without empirical methods is dead. It has been dead since Riemann's "Über die Hypothesen welche der Geometrie zu Grunde liegen" and poltically dead in the scientific community since Bertrand Russell failure in Principia Mathematica. As far as the formal logical arts and science the Austrian schoolers are worse than young earth creationists, geocentrists and flat earthers combined.

The Austrian school was nothing more than intellectual still born bastard child of the 19th century London School of Economics which was nothing more than than PR facility for British "Free Trade" Imperialism was America was founded to oppose and indeed destroy.

The purpose of the Austrian school is create the crisis conditions necessary for Fascism as has been documented by the great book "Old Nazis, The New Right, and the Republican Party: Domestic fascist networks and their effect on U.S. cold war politics."

The Fascist networks that tired to murder FDR and hatched the "Business Plot" to overthrow the United States later created what became the slavertarian movement, John Birchers, and other far right reactionaries. They are the American Fascists and seditionist to the Republic.

The are what FDR warned of... "If history were to repeat itself and we were to return to the so-called ‘normalcy’ of the 1920’s, then it is certain that even though we shall have conquered our enemies on the battlefields abroad, we shall have yielded to the spirit of Fascism here at home."

Notwithstanding your admiration and quoting of a former President who modeled his own policies after the fascist Mussolini...

"A man alone on a desert island can still be private property owner of that island even if nobody else is around."

Maybe in his own mind but that's it but that simply a appeal to his own authority.

Property rights would be "in the minds" of two or more men in a "social construct" as well, and each would "appeal to their authority."

Property rights are based on people's minds, their convictions, yes. The fact that you admit it exists for a man alone on a desert island, is no less true in a "social construct" as well.

Saying property rights are a "social construct" doesn't make it something other than a cognitive-based concept.

On what basis does Pete know this individual claim is true?

On what basis do you know I'm wrong? On what basis do you know property rights are a "social construct?"

He certainly can't deduce logically this from any set of claims.

Sure I can.

He is either saying that he knows apriori that every one else in this situation will agree with the Man on the island on the issue which to say everyone is of the same mind which therefore say that individualism is false or Pete must saying that property exists without interaction,

Wrong. A priori logic does not imply people will agree with it. True statements can be disbelieved.

But property can't exist without the ability to interact with it which is a contradiction as to exist means to interact.

This statement is incoherent.

It's not just "interaction." Property arises from mixing one's labor with the object in question.

If property exists then it must be different in than non-property in it interactive effects and without the presence of someone else on the island what observation can Pete make that would be different than the Island that the lone occupant who believes that island is his property and an island on which the lone occupant doesn't?

Dude, you're on crack. I can't continue reading this drivel. It's run on sentences with no systematic reasoning.

"Before there were any humans on Pallene, the story goes that a battle was fought between the gods and the giants. [Traces of the giants' demise] continue to be seen to this day, whenever torrents swell with rain and excessive water breaks their banks and floods the fields. They say that even now in gullies and ravines the people discover bones of immeasurable enormity, like men's carcasses but far bigger."

—Greek historian Solinus, c. AD 200

The ancient Greeks had never seen mammoths, mastodons and wooly rhinoceroses. So when they came across their bones and skulls they had no idea what they were looking at.

It made sense to them to assume that these were the remains of gods, humanlike giants, and cyclopes. Their ignorance of the actual facts led them to construct completely erroneous theories about the past, based on incorrect a priori assumptions.

That's what the austrian school did with their account of the history of money. They assumed that their ignorance of the actual facts confirmed their incorrect a priori assumptions.